This raises an important question: Do institutional investors have an obligation to pull money from a hedge fund subject to this much government scrutiny? Neither SAC nor Cohen have been accused of any wrongdoing. (And, personally, I strong suspect that SAC has become the focus of investigations simply because it is so successful.)

But investing with Cohen now carries the additional risk that he may find himself subject to civil or criminal charges for violating securities laws. This has to be a huge distraction for Cohen and his managers. At some point, institutional investors who owe fiduciary duties to their clients must wonder whether this additional risk is worth taking.